Public Accounts Committee: Google’s tax ‘disproportionately small’

The amount of tax paid by Google is ‘disproportionately small when compared with the size of Google’s business in the UK’, according to a report published today by the Public Accounts Committee (PAC).

The Committee says that the deal agreed by Google with the UK government ‘reinforces [its] concerns that the rules governing where corporation tax is paid by multinational companies do not produce a fair outcome’.

The PAC has now urged HMRC to ‘lead the way in pressing for changes in international tax rules to prevent aggressive avoidance by multinational companies’.

Last month Google announced that it had agreed to pay an additional £130 million in corporation tax for the period January 2005 to June 2015, following the conclusion of a six-year investigation by HMRC.

Through this deal Google has inadvertently brought corporate tax avoidance, and the way some governments facilitate it, into the headlines. Last month the former chair of the PAC Margaret Hodge wrote on Left Foot Forward:

“The UK has a ridiculously complex tax system, made so in part by the 1,128 tax reliefs. Every year the chancellor uses his budget speech to produce more tax reliefs. Yet each one becomes an opportunity to avoid tax as the professionals interpret the rules and identify loopholes.”

Today the PAC says that the ‘UK is a key market for Google but the enormous profit derived is out of reach of the UK’s tax system’, and calls the corporation’s argument that sales to UK clients take place in Ireland ‘deeply unconvincing’.

The report stresses that the corporation’s stated desire for simplicity in the tax system is at odds with the complex operational structure it has created, apparently to minimise the tax it pays.

PAC chair Meg Hillier also criticised the length and costliness of HMRC’s investigation:

“The bigger prize after a costly six-year investigation would have been to develop a new approach to the activities of internet-based companies.

“We are not convinced HMRC has achieved this and it must work with overseas tax authorities if we are to see lasting and effective change in the international tax system.”

Chancellor George Osborne insists that the Google deal was a ‘major success’, with the dubious boast that:

“When I became the chancellor, Google paid no tax. Now Google is paying tax.”